A looming federal government shutdown could destabilize Maryland’s budget outlook.

Minor decreases in projected revenues announced Thursday by the Board of Revenue Estimates represent a mostly flat budget picture compared to March projections.

State fiscal officers warned that inflation and a shutdown, if House Republicans cannot agree on a plan to fund the federal government for the fiscal year that begins on Sunday, pose a potential risk to the state’s revenue picture.

Robert Rehrmann, director of the Bureau of Revenue Estimates, said the new forecast represents “only minor adjustments, and we are largely consistent with our forecast” and that it includes modest growth rates.

“Unfortunately, we are still in a situation where we do have elevated risks, not only from recession, but from this potential federal government shutdown,” Rehrmann said.

A federal shutdown could have dire impacts on the finances of both residents and state government.

“The impact will very much depend on the type of shutdown, its duration and if there’s significant spending cuts, as far as any agreement to end the shutdown,” said Rehrmann.

Overall, Maryland may feel the pinch more acutely than many states.

More than 160,000 federal jobs — not including federal contractors — are based in Maryland. The total is equal to more than 4% of all jobs in the state.

“At the March board meeting, I noted that revenue forecasts indicated a flashing yellow light for Maryland’s economy,” said Comptroller Brooke Lierman (D), chair of the Board of Revenue Estimates. “I think that remains true now. As we just heard, from unknown trends associated with a post-COVID economic recovery to deeply concerning implications of a looming federal government shutdown, the warning lights are still flashing. Any full or partial shutdown could mean delayed paychecks for federal employees and contractors, federally supported researchers, service providers and others who contribute to Maryland’s employment and income tax base. We could see a slow down in state tax receipts and reduced economic activity statewide as well.”

One in nine households benefited from either a federal paycheck or federal retirement income, according to the Office of the Comptroller.

“Despite Republican extremists’ refusal to govern, the Moore-Miller Administration is taking steps to ensure that state government will continue to operate, that households in need continue to receive assistance, and that hospitals and other institutions that provide essential services can continue to function,” said David Turner, a spokesperson for Gov. Wes Moore (D).

“In the near-term, we plan to use a portion of our state cash reserves to bridge fund services that rely on federal support — but only for a limited period of time and only if we maintain confidence that the federal government will reimburse the State after the shutdown,” Turner said. “State agencies are ready to employ contingency plans to ensure continued operations.”

Included in that effort is a plan to offer no-interest loans to affected individuals through a coming Federal Government Shutdown Employment Assistance Loan program. The loans, offered through the state Department of Labor, would have to be repaid at the conclusion of the shutdown.

Senior administration officials told reporters Thursday morning that the state is prepared to use $1 billion of its $5 billion in cash on hand as part of a strategy to ease — perhaps temporarily — the impact of the shutdown.

But they said that cash could be expended in less than a month.

Two shutdowns, one for 16 days in 2016 and a 35-day partial shutdown in 2018-2019, had little impact on the state, according to Rehrmann.

Budget sequestration during a fight over the federal debt limit in 2013 “had significant impacts on the Maryland economy,” causing a slowing of state tax withholdings and economic output that took years to recover, he said.

In three counties — St. Mary’s, Charles, and Prince George’s — more than 20% of gross income from salaries or retirement income comes from the federal government.

In Calvert, Anne Arundel, Howard and Harford Counties, federal paychecks and retirement payments make up more than 10% of gross income.

Total wages and retirement income from federal sources equals $31 billion or 10.5% of all income earned in Maryland, according to the Office of the Comptroller.

“Most urgent at this current moment is that we’re just days away from the potential federal government shutdown, that as you can see from the dips that we saw during sequestration, could have a devastating impact on the state,” said Lierman. “And so, I certainly reiterate my admonition and urge House Republicans to come together and put the nation at the forefront of their thinking. There are families, there are businesses who are depending on them to do their job and to ensure that we do not have a shutdown and that we continue to fund the federal government services.”

The three-member board unanimously approved what amounted to only minor changes to revenue estimates for the current budget year.

The board also provided the first look at fiscal 2025, which begins next July 1.

In the current year, analysts now project revenues of nearly $24.6 billion — a decrease of roughly $14.1 million from the March estimate.

Growth in nearly every revenue category was offset by a projected $301 million decrease in personal income taxes and more than $46 million in projected interest on investments.

State revenue is projected to grow by less than 1% compared to the previous year.

In fiscal 2025, analysts project that personal income tax collections will rebound as corporate taxes decline. The state is projected to collect nearly $25.1 billion — a roughly 2% increase compared to the current budget year.

“These low growth rates do not keep pace with growth in expenditures and the structural deficit that we face,” said state Budget Secretary Helene Grady, a member of the Board of Revenue Estimates. “The administration has been clear from day one that the factors that drove our state’s cash surplus by the fall of 2022…like many states around the country, were external to Maryland and would not be sustained.”

Maryland’s budget is projected to grow by roughly 5% in the coming year, according to the Department of Legislative Services.

“To put today’s forecast in context of budget planning, the forecast makes the structural deficit a little worse than projected by DLS over the summer,” Grady said.

“As we prepare to introduce our next budget for fiscal year 2025, come January, the administration’s work is cut out for us,” she said. “We will continue to be selective, disciplined and intentional with our investment decisions.”

In June, the Department of Legislative Services projected the fiscal 2025 budget will start with a $418 million deficit — a $650 million decrease compared to the January estimate.

Senate Republicans called for reducing spending in order to prevent tax increases.

“Today’s announcement by the Board of Revenue Estimates confirms what we already knew — a surplus this current fiscal year, with significant challenges in the coming years,” said Sen. Paul Corderman (R-Washington), a member of the Budget and Taxation Committee. “Our economy is changing and the influx of Federal COVID dollars is over. We must reign-in overspending now, or else all Marylanders will see tax and fee increases in the very near future.”

By Bryan P. Sears

City Council again met at the Empowerment Center on Pine St. while the City Council Chamber windows are being repaired. For the meeting, the City did make some improvements to the visual and audio systems but it was still difficult to hear some of the comments.

That said, the meeting started off with a presentation by Ward Realignment Committee Chair Jim Sicks and Vice Chair Greg Meekins. The purpose of the Committee is to keep the populations of the Wards balanced to within 5% of each other. Cambridge has grown from the last census by 747 people to 13,096 which divided by the 5 wards gives an average of 2,619 people per Ward. Wards 2, 3, and 4 fit into the 5% differential however, Ward 1 had too many people and Ward 5 actually lost people from the last census.

The problem the Committee has is that Ward 1 and Ward 5 don’t touch each other so the Committee could not just switch some people from Ward 1 to Ward 5. The Committee came up with a plan to move people from Wards 3 and 4 to Ward 5 and to backfill Wards 3 and 4 from Ward 1. While this seems very complicated, the moves only involve 3 % of the City population. The City Council decided to have a listening session so the public could see what streets are involved and ask questions of the Ward Realignment Committee. The session will be held on September 28th at 6pm at City Hall, 410 Academy St. in the Utility Conference Room.

The Council moved on to the Consent agenda which contained some of the usual requests for events in the City but also included a report that the demolition of Club Dujour, a project that has been discussed for the last 12 months, will in fact take place. Also included on the Consent agenda was a decision to pursue a consulting contract to establish the right size for the Police department, a report on reinstating impact fees on new construction, and finally, an agreement between the City and the Packing House on an easement and parking spaces for people using the Rails to Trails bike path. The cost of the parking and easement to the spaces is $333,000. All of these projects are very detailed but the Council had no comments and passed everything on a 5/0 vote.

The next topic was an update on the Charter changes. The City Manager and the City Attorney have compiled changes they made which included suggestions from the two listening sessions. The proposal which is quite detailed, covering over 17 pages of the Charter and involving over 80 changes is now open again for 21 days for additional public comment. The Council will vote on the changes at the October 23 Council Meeting.

Some of the major changes are: 1) Moving the election date from November to May, 2) Allowing the Commissioners to appoint a replacement in the vacant Ward if a vacancy occurs in the last two years of a term including the Mayor’s position, 3) If a position is vacant in the last 4 months of the term, it will remain vacant. The Council made no comments on the proposal.

The Curfew Ordinance was read for the second time which means there can be public comment. Three people commented on the Ordinance. The first, a retired teacher, was in support of the Ordinance because it reinforced the need for juveniles to study on weeknights. Dr. Theresa Stafford commented that the Ordinance should include financial penalties and finally, LaShon Foster wanted to know what happens if the police pick up a juvenile who does not live in the City. The Police Chief said the parents would be notified but the enforcement mechanisms in the Ordinance would not apply. The Council then moved out of public comment section of the meeting and accepted amendments from the Council members. The Mayor made a number of changes (10 to 12) which were approved by the Council but they did not allow any public comments on the amendments. The Council then voted to approve the Amended Ordinance.

In the New Business Section of the meeting, the Council heard about “Policing by Environmental Design Concept”. This is a long title for allowing the Police to close streets or limit access to Parks or other areas that are known for criminal activity. The Police Chief wants to try it out on the Calvin Mowbray and Stephen Camper Park. The Chief wants to be able to talk to the neighborhoods before taking any action and has a meeting set up on October 18th at the Park to discuss his ideas.
The Council also received a report from Assistant City Engineer Bucky Jackson on traffic. It contained two proposals and recommendations from the Traffic Committee. The first involved traffic calming on Somerset Ave. and the second involved removing six traffic lights in the downtown area and replacing them with stop signs. The Traffic and Safety Committee is meeting on October 12th to discuss these issues. The meeting is virtual and can be seen at https://meet.google.com/etm-gcko-xxp?hs=224

Dorchester’s County government has lost a key credit rating in the latest fallout from years of overdue financial audits that are only now becoming available. 

Moody’s Investors Service late last week formally withdrew Dorchester’s credit rating when county officials failed to produce financials under a 30 day deadline. Moody’s cited the lack of information from Dorchester in wiping out its credit rating.

County Council President Lenny Pfeffer said Dorchester officials are engaged with Moody’s to try to fix the information. The county posted the oldest of the overdue audits, for fiscal year 2021, on its website Monday.

“We’ve instructed (Moody’s) that as soon as we receive the audits that are complete, we will make sure that they have that information,” Pfeffer said. “But in the meantime, we’ve sent them everything else that we could up to this point.”

With no credit rating, the county would be forced to pay much higher interest rates on any bonds or capital leases. The difference could be 12 to 15% higher than the desirable municipal bond rating it had enjoyed until now. That’s more taxpayer dollars going to pay for higher interest. 

The lack of a credit rating also means a likely discount in the resale value of at least $30 million worth of bonds the county previously issued. S&P Global, another rating service, withdrew its rating for Dorchester in April.

The county government has failed to file legally required financial audits to the state since 2020. With the 2021 audit complete, the county is still overdue on the 2022 audit. The fiscal year 2023 audit is due by the end of October.

Officials previously cited high turnover in the finance department and a 2020 computer hack as reasons for the delay. But multiple extensions granted by the state last year had expired with no completed audit submitted. Pfeffer said the current delay is a matter of time auditors need to work.

“We’re at the mercy of the third party independent auditor, so we can only go as fast as they go,” Pfeffer said. “We’ve tried to supply as much information as personnel that they’ve asked for, but we’re still at their mercy.”

Pfeffer said at a council meeting September 5th that the audits were 99 percent complete and predicted the oldest missing report, for fiscal year 2021, would be ready in two weeks. The posting on Monday of the 2021 audit comes one day inside his prediction. Pfeffer said he expects progress will accelerate.

“FY21, since they had to translate a lot of data for the system that was lost and stuff that was put in incorrect or whatever, the new information going into 22 should go much faster,” he said.

The county can submit a fee to Moody’s to reevaluate a credit rating once it has the required financial reports finished. Moody’s did not indicate how long it could take to reestablish a credit rating after financial audits are delivered. 

By Jim Brady of WHCP Community Radio 

University of Maryland Shore Regional Health’s plans for construction of a new Regional Medical Center (RMC) in Easton have moved a step forward as hospital officials have received notice that the Maryland Health Care Commission has docketed the application for the project’s Certificate of Need (CON). 

MHCC provided public notice of the docketing in the Maryland Register on August 11th, which initiated a 30-day window for public comment. As of today, no comments have been posted, and the CON application is now ready for MHCC’s review and anticipated approval in the coming months. 

Docketing of the application not only keeps the project moving forward as is required by MHCC’s procedural regulations, but also allows MHCC to gather any supplemental information needed to render a decision. 

The total projected cost of the new Shore Regional Medical Center is $550 million. 

The schematic design phase of the project, which has been completed, involved the participation of multiple departments in refining layout plans and creating new external renderings. The design development phase is now in progress, focusing on the design of individual rooms for optimal workflow.

Plans to build the new Shore Regional Medical Center in Easton are critical to the comprehensive health care delivery plan for Caroline, Dorchester, Kent, Queen Anne’s and Talbot counties. The new location on Route 50 at Longwoods Road will promote better access to care, the new design will accommodate advances in high-quality care and improve patient satisfaction, and the new facility will enhance UM Shore Regional Health’s ability to recruit and retain health care providers and staff.  

Using one of Maryland’s toll bridges and tunnels could become more expensive.

The state has not seen an increase in tolls in more than a decade. Joseph Sagal, executive director of the Maryland Transportation Authority, said that era, which included two toll reductions, may be at an end within the next four years.

“We started looking at the last time tolls were raised, that was nearly a decade ago,” Sagal said at a meeting of the Transportation Revenue and Infrastructure Needs Commission in Annapolis.

“There was a subsequent reduction around 2016 and with that toll revenue decline we saw during the pandemic era and … increased costs,” it is triggering a need for toll revenue increases in the 2028 fiscal year, he continued.

The last time tolls increased was in 2011 under then-Gov. Martin O’Malley (D). At that time, the authority voted to raise cash tolls for cars crossing the Chesapeake Bay Bridge from $2.50 to $4.

Cars crossing the former Harry W. Nice Memorial Bridge in Charles County would cost $4, an increase of $1.

Tolls on both then increased again to $6 in 2013.

Former Gov. Larry Hogan (R) ran his 2014 campaign criticizing O’Malley and Democrats for overtaxing state residents. He cut tolls twice — once in 2016 and again in 2019 — during his two terms in office.

During that time, the state demolished the old Nice Bridge and replaced it with a modern Governor Harry W. Nice Memorial/Senator Thomas ‘Mac’ Middleton Bridge.

Maryland Budget Secretary Helene Grady asked Sagal for details on the impact of toll recent reductions.

“What was the sustainability plan at the time the tolls were reduced and to what extent have the assumptions about that sustainability plan by the previous administration been realized or not realized?” Grady asked.

The need for an increase was attributed to “operating costs being so high, especially as it relates to personnel, equipment, repairs” and other concerns, according to Sagal.

Frank Principe, chair of the commission, said he has discussed the issue of tolls with Transportation Secretary Paul Wiedefeld “as well as the overall performance relative to the toll revenues.”

Principe said the toll rates “is something that the commission will be interested in discussing further at another meeting. I’m sure we’ll get to that in due course.”

The 31-member blue ribbon panel — referred to commonly as the TRAIN Commission — is charged with reviewing, evaluating and making recommendations on how transportation projects should be prioritized and funded.

Last month, commission members were briefed on the need to seek alternative funding sources to bolster declines in state gas tax revenue.

The authority is funded only by tolls from eight facilities in Maryland.

The authority has more than 180 projects in its six-year plan totaling $2.7 billion. The total is a nearly $170 million increase over last year’s six-year planning document.

Included in that are the replacement of eight bridges that are each 50 years old or more, as well as an ongoing study of a third crossing of the Chesapeake Bay.

Sagal spoke in broad terms and offered no specifics related to timing or the amount of an increase.

Sagal’s talking point left some commission members looking for more information.

Senate Minority Leader Sen. Stephen S. Hershey Jr. (R-Upper Shore) said Sagal did not offer enough justification for toll increases.

“I think the important thing that he said, he said the $400 million that they have in operating costs is fine,” said Hershey. “They’ve been able to meet that. So, then you have to look at what the projects are. I think he said the $600 million in projects. I don’t think he came up here and said ‘hey, we’ve got a lot of projects that we haven’t been able to do because the revenue is not there.

“I’d like to hear more of a justification if somebody said we need to increase the polls for exactly what projects out there are not being completed,” he said.

By Bryan P. Sears

The meeting started at the usual time but not at the usual place. The City Council Chamber on Gay St. is undergoing some renovations, so the Council meetings have been moved to the Empowerment Center on Pine St. for the month of September. Unfortunately, for listeners such as myself, the sound system did not pick up the Mayor and several Council members’ comments.  Also, the camera did not pick up the public or the screen, which again was unfortunate since there were two presentations with slides which could not be seen. That said, the following is a summary of what I could hear.

Pam Gregory, the CEO of United Way of the Lower Eastern Shore, made a lengthy and depressing presentation on poverty in Maryland, Dorchester County and the City.  She outlined that her organization follows a combination of the populations below the poverty level and barely above the poverty level. Her charts showed that these two income levels make up 38% of  Maryland’s population, 45% of Dorchester County’s population, and a whopping 57% of the population in Cambridge.  Cambridge is one of the worst cities for “asset limited” populations in the State. Ms. Gregory showed several other slides illustrating that Cambridge is at the bottom levels of income however you cut the figures.  She recommended that the Council focus on job development and job training.  The Council members had no comments.

Lisa Molock of Maryland Moms Demand Action’s Local Eastern Shore Group, spoke next by Zoom and was very difficult to hear.  Her focus was on gun violence.  She spoke for several minutes asking the Council to do more to curb the gun violence in the City.  Ms. Molock was very complimentary of the City’s Police force, but thought the problem was larger than just police involvement. The Council members made no comments on the presentation

The Council’s next action was approval of two Ordinances (#1228 and #1230).  Ordinance 1228 is the revised curfew regulations for the City.  This ordinance reflects the Mayor’s effort to revise the old curfew to eliminate the monetary penalties on the parents of young teenagers and replace them with social workers who will try to work with the families to overcome the problems which allow children to be out late at night unsupervised.  While not perfect, this approach tries to correct the core problem instead of adding to more family difficulties by imposing fines. Since this was the first reading there was no discussion and no vote.  Ordinance #1230 dealt with the acquisition of abandoned or rundown properties.

The Public Comment section saw four speakers who spoke about poverty in Cambridge; praised the police for their efforts to do community policing; claimed there are only 25 kids who are doing a lot of the harm and are not held accountable; and finally, and maintained that there should be better tracking of the curfew to see if it is having an effect.

I could not hear any Council members’ comments except for those of Brian Roche, Ward 5, who gave an impassioned speech about not crowding low-income people together in one area but spreading everyone out and mixing up the income levels though out the city. He said this is the most important issue for the city especially considering that the Hearn Building on Race Street is slated to have 44 low-income apartments at a cost of $20 million.  Each unit will cost $450,000. 

Meetings:

1. Ward Realignment Committee to be held on Sept.14th at 6 pm at the Empowerment Center, 615B Pine St.

2. Historic Preservation Commission meeting on Sept. 20th at 6 pm at the Empowerment Center

3. Council Work Session to review registrations for non-owner-occupied property, including rental registration, short term rental registration, vacant property registration and more to be held on Sept 25th from 5-6 pm at the Empowerment Center.

4. City Council regular meeting to be held on Sept. 25th at 6 pm at the Empowerment Center.

5. Planning and Zoning Commission meeting to be held on Oct 3rd at 6pm at Council Chambers, although the location may change depending on Construction scheduling.

6. Traffic and Safety Committee meeting to be held virtually on Oct 12th  at 1pm via  https://meet.google.com/etm-gcko-xxp?hs=224 .

New Business: Planning Commission accepted a recommendation from staff to approve an LED sign to be installed at the Wesleyan Church on Race Street.

Talbot (YMCA) Overlay related: By a vote of 4 to 3, the Planning Commission passed an amendment to the table of permitted uses that would clearly allow the YMCA to operate all its existing programs at the Talbot Avenue facility. This amendment, together with the zoning overlay, will be considered holistically by the City Council, likely on October 23rd as a second reading. Together, the overlay and amendments will clearly allow the YMCA to continue to operate at Talbot Avenue, should it choose to stay, and if the YMCA chooses to relocate, the number of institutional uses would be more limited and in line with what is found in a residential neighborhood (like a church, school or other facility similar to the YMCA). The YMCA now supports the amendment and overlay while continuing to ultimately advocate a residential use for the property should it vacate.

Rezoning & Map Amendment: A cluster of parcels at the corner of Washington and High Streets are zoned NC4 and General Commercial, making development difficult. The Planning Commission approved rezoning all parcels to Downtown Waterfront Development District (DWDD) as the misc zoning was likely an error in the 2014 rezoning.

Discussion Items:

Grain Silos: Substantial discussion ensued over the installation of grain silos behind RAR on Poplar Street. The Planning Commission believed they should have the ability to review this issue, while the Zoning Officer, Steve Kaii-Ziegler believed it to be an administrative decision. This was followed by additional discussion related to procedures for matters presented to the Planning Commission. There also appears to be some question of the ownership of the parking areas behind Poplar Street where the silos might be located.

Intermediate Care & Group Homes: City Attorney has conducted extensive research regarding these uses for mental health and addiction and has provided a memo to the Planning Commission. After review by the members, these issues will be discussed at a future meeting. The City Attorney believes there can be reasonable regulations created to provide oversight and allow the City to determine these homes are properly licensed by the appropriate authorities.

Discussion deferred on recreational marijuana and solar field on Egypt Road.